Puma Biotechnology Stock Crashes on Weak Nerlynx Sales

One trader appears to have initiated a collar ahead of earnings

by Karee Venema

    Published on May 10, 2019 at 9:38 AM
    Updated on May 10, 2019 at 11:14 AM

    The shares of Puma Biotechnology Inc (NASDAQ:PBYI) have plunged 35.6% this morning to trade at $19.34 -- poised for their worst day since a 48% post-earnings drop back on Nov. 2. This comes in reaction to the drugmaker's first-quarter earnings report, which showed net product revenue was lower than expected. Net sales of PBYI's cancer drug Nerlynx also missed the mark, due to "an increase in patients discontinuing treatment," according to CEO Alan Auerbach.

    RBC said the results spark concern that Nerlynx sales have peaked or "hit a plateau" -- a concern echoed by Cantor Fitzgerald, which said the drug's "commercial effort needs significant overhaul after a complicated launch, which could lead to more disruption in 2019." The latter downgraded PBYI stock to "neutral" from "overweight," and joined at least four other firms in cutting their price targets on the security.

    Most analysts are already on the sidelines when it comes to Puma Biotechnology, with six of eight maintaining a "hold" or worse recommendation prior to today. However, more price-target cuts could come down the pike, considering the average 12-month price target of $31.25 is a 61% premium to current trading levels.

    Meanwhile, one speculator appeared to have taken the cautious route ahead of earnings, and implemented a collar options strategy. Specifically, it looks like 2,500 May 30 puts were bought to open on Monday, May 6, at the same time 2,500 May 36 calls were sold to open. Essentially, the trader simultaneously initiated a protective put to guard against a sharp downturn in PBYI stock, but offset the cost with a covered call.

    On the charts, PBYI stock rallied off its early November two-year low of $17.60, topping out at $43.90 on March 18. Since then, though, the shares had been trending lower, and are headed for their seventh loss over the last eight weeks.

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